Poverty and Inequality

Abstract

INTRODUCTION Poverty and inequality have been deeply rooted in Latin American societies since the early colonial era. With the arrival of Spanish and Portuguese conquerors, the diverse resources of the region in terms of land and other factor endowments were carved up in ways that favored the few at the expense of the many. Later, the intensification of colonization brought the development of economic structures that cemented these inequalities in place. Both the diversity of factor endowments in the region and the way in which they have been distributed have therefore played a heavy hand in predisposing Latin America toward certain paths of development – paths characterized by wide-ranging degrees of inequality in wealth, human capital, and political power. The severity of inequality has varied across the continent, depending on many factors. Generally speaking, however, patterns of production, land distribution, and schooling that Latin America has followed have consistently fostered high degrees of inequality. Many of these patterns were formed in the early colonial era, when indigenous populations were denied rights while a select number of elites of European descent were given the lion’s share of wealth, land, and power to administer their conquered territories. The early differences in the extent of inequality persisted and were reproduced in the way economic and social institutions evolved over time; these institutions, in turn, exerted their own influence on the path of economic development. In cases of extreme inequality, institutions favored elites and limited the access of much of the population to economic opportunities. Having attained high socioeconomic status, elites were thus in an advantageous position to maintain that status over time, with the rest of society paying the price of underdevelopment.